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Mortgage Bankers Assocation Writes 50 Page Letter to Legislators

[Dec 25, 2009.]


On December 22, the Mortgage Bankers Association submitted a 50 page letter to the Federal Reserve Board of Governors. The intent of this letter is to address certain law changes to mortgage paperwork that are being pondered by the U.S. Congress as a part of consumer finance reform.

While admitting that the fact that many people take their mortgage paperwork, sign wherever they're told to sign, and don't understand a word of it is a problem, the MBA does take issue with several of the proposed changes.

For refinance borrowers, here are three major points contained in the letter:

1. No Limit Broker Compensation

Mortgage brokers have been vilified in the press over the past two years for overcharging borrowers and not disclosing true loan costs. The "yield spread premium" method, by which the lending bank gives the mortgage broker an extra fee for putting a borrower into a certain loan, has been widely criticized as a hidden fee that most refinance borrowers are not aware of.

In light of these problems, several lawmakers have proposed limiting compensation available to mortgage brokers to a set fee of some sort. The MBA, in its letter, srongly opposes such limits, arguing that such a law would only lead to more lawsuits and thus more cost for home loans in the future.

2. Easy to Understand Home Loan Summaries

The MBA is supporting the effort by legislators to demand that mortgages be described to consumers with at least some small degree of clarity. In many ways, the Mortgage Bankers Association has been leading the drive to clarify and simplify mortgage lending.

Mostly, clarity would show itself in requirements of new, drastically simplified mortgage "summary" paperwork. For example, home loan applicants might be given a "Key Questions to Ask About Your Mortgage" page, as well as a "Fixed vs. Adjustable Rate Mortgage" comparison page.

Simple documents like these could do a lot to protect unsavvy mortgage applicants.

3. Slow Down Please

On a general note, the letter from MBA begs for time to read any new bill authored by Congress. Typically, the new consumer protection bill is incredibly lengthy and difficult to read.

Ironically, Congress may be committing the exact same crime attributed to mortgage lenders: refusing to put law into language that the average human being can at least halfway comprehend.


About Author:

Andrew Freiburghouse is a writer and businessman. He has worked as a magazine reporter, tax preparer, screenwriter, copywriter, and loan officer. He graduated from Santa Clara University in 1999 with a B.A. in English. Andrew was born and raised in the City of Los Angeles.

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